Denny Hecker, one of Minnesota’s largest car dealers is selling three of his dealerships to private investors and closing the doors on six others.
The moves will result in the layoff of approximately 400 employees from the Denny Hecker Automotive Group.
Hecker plans to continue running seven car dealerships – six in Minnesota and one in Los Angeles, CA.
“The decision to realign our dealership came as we found ourselves in the midst of a ‘perfect storm’ of economic bad news,” Hecker says in a statement released this week.
Part of the perfect storm includes problems with Chrysler Financial, the firm that has financed Hecker’s companies for nearly 20 years.
Chrysler Financial pulled all of its financing in November from Hecker’s 18 dealerships and affiliated companies, according to a story first reported by the Minneapolis St. Paul Business Journal.
Hecker promptly filed a lawsuit against Chrysler Financial citing five counts of fraud, defamation, interference with contractual relations and negligent representation.
According to the lawsuit, Chrysler Financial convinced Hecker in 2006 to acquire Advantage Rent-A-Car, a company it has provided fleet financing to since the late 1990s.
At the time, Advantage was near bankruptcy which would have left Chrysler Financial on the hook for nearly $70 million, the suit says.
Hecker says that at Chrysler Financial’s insistence, he entered into negotiations this year to sell Advantage to a major rental firm to again protect the captive firm from exposure created by the current credit crisis.
The relationship between Hecker and the captive firm went south, according to the suit, when Chrysler Financial “stalled negotiations” with U.S. Bank on an agreement to establish a blocked-account agreement that would permit the flow of funds after Hecker switched his banking from Wells Fargo & Co. to U.S. Bank.
Chrysler Financial’s actions meant Hecker was unable to make payments or receive funds from the captive and resulted in numerous bounced checks to dealerships that Hecker trades vehicles with.
The Hecker company is the second large privately held dealer group to have its credit line and floor plan financing yanked by one of the auto maker captive finance firms. In September, GMAC LLC stopped providing floor plan financing to the Bill Heard Automotive Group, one of nation’s largest dealer groups and General Corp.’s best selling Chevrolet dealer. The Heard group subsequently declared bankruptcy and is in liquidation.
Hecker is closing Blaine Bargain Lot; Forest Lake Chrysler Jeep Dodge Mitsubishi; Monticello Dodge Ford and Mercury Suzuki Kia; Rosedale Hyundai; Shakopee Chrysler Jeep Dodge; and Stillwater Ford Lincoln Mercury.
Meanwhile, he is selling Inver Grove Heights Hyundai, Inver Grove Heights Volkswagen and Peninsula Dodge.
The restructured group will consist of two Toyota dealerships, three Hyundai dealerships, one Cadillac Pontiac GMC store and one Chevrolet dealership.